Trust, society or Section 8 company: which one for your NGO

A trust, a society and a section 8 company can all run a charity, hold property and apply for the same income-tax registration. They differ in who controls the body, how many people you need, which office registers it and how much paperwork follows every year. Pick by how you plan to run it.

What is the real difference?

Ask one question first: who should have the final say? In a trust, the settlor hands over money or property and the trustees named in the deed run it. There are no members and no elections unless the deed creates them. In a society, members come together under a memorandum and elect a governing body. In a section 8 company, members own the company and directors manage it, with company law standing over both.

So a trust suits founders who want lasting control. A society suits a membership body such as a club, an association or a residents' group. A section 8 company suits a body that will take large grants or corporate money and wants a structure that funders recognise.

Trust, society and section 8 company side by side

What does the law ask of a society?

Section 1 of the 1860 Act lets any seven or more persons joined for a literary, scientific or charitable purpose form a society. They sign a memorandum of association and file it with the Registrar. Section 2 says the memorandum must carry the society's name, its objects and the names, addresses and occupations of the governing body. A copy of the rules and regulations goes with it, certified by at least three members of the governing body.

The central Act sets the registration fee at fifty rupees, or a smaller sum if the state so directs. In practice, many states have amended the Act or passed their own society law, with their own fees, renewals and yearly filings. Check your state's Registrar of Societies before you plan.

What does the law ask of a section 8 company?

Section 8 of the Companies Act, 2013 lets the Central Government license a company whose objects are things like education, research, social welfare, religion, charity, sports, art, science or protection of the environment. The company must use its profits for those objects and cannot pay any dividend to its members. In return it can drop the words Limited or Private Limited from its name.

Is there a minimum capital? The Act no longer fixes a minimum paid-up capital figure for companies. What it does fix is discipline. A section 8 company has the same obligations as other limited companies. It cannot alter its memorandum or articles without the Central Government's prior approval. If it breaks section 8, the company can be fined from Rs 10 lakh up to Rs 1 crore, and its officers from Rs 25,000 up to Rs 25 lakh. The licence can also be revoked. On winding up, leftover assets go to another section 8 company with similar objects or to the Insolvency and Bankruptcy Fund, never to the members.

The licence and incorporation are applied for online with the Ministry of Corporate Affairs. The exact e-forms change from time to time, so confirm the current ones on the MCA portal before you file.

Do all three get the same tax treatment?

Yes, as far as registration goes. The Income Tax Department's user manual for Form 104 lists public trusts, registered societies and section 8 companies among the bodies that can apply. Form 104 covers registration under section 332 and approval under section 354 of the Income-tax Act, 2025. These are the new names for 12A and 80G. The form you choose for your NGO does not earn you a better tax position.

How to choose in four questions

1. How many committed people do you have? Fewer than seven rules out a society under the central Act.
2. Who should control it in twenty years? If the founders or their nominees, lean towards a trust. If a changing membership, lean towards a society or a section 8 company.
3. Who will fund it? Family and local donors are comfortable with a trust. Large institutional funders often prefer the audited, public record of a company.
4. Who will do the yearly filings? If nobody on the team can keep up company filings, do not pick a section 8 company.

A worked example with numbers

Three friends in Chennai want to fund school fees with a starting corpus of Rs 2,00,000. A society is out, because they are three and not seven. A section 8 company is possible with two members, but it brings company filings every year. A trust fits. In Tamil Nadu, the Registration Department's fee table shows stamp duty of Rs 1,000 on a declaration of trust and a registration fee of 1% of the corpus, which is Rs 2,000 here. Add Rs 1,499 for drafting the deed and the trust is set up for about Rs 4,499, before the PAN and other small costs. Other states charge differently.

The mistake people usually make

People choose by the cost of registration and forget the cost of running the body. A section 8 company that misses its yearly filings collects late fees and notices from the Registrar of Companies. A society with seven names on paper and two people doing the work soon cannot hold a valid meeting. And a trust deed with narrow objects is hard to widen later. Choose the form you can keep compliant for years, then draft the founding document with care. If a trust is your answer, read types of trust in India and then how to register a trust.

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